Publication - Research and analysis

Behaviour and motivation of businesses: qualitative insights

Published: 1 Nov 2019
Part of:
Business, industry and innovation
ISBN:
9781839603105

Report on research to understand attitudes and behaviour of SME owners in Scotland in relation to business growth.

90 page PDF

781.9 kB

90 page PDF

781.9 kB

Contents
Behaviour and motivation of businesses: qualitative insights
5 Future growth

90 page PDF

781.9 kB

5 Future growth

This chapter outlines business owners’ views on their future growth potential. Specifically, it considers the extent to which they felt prepared for growth; any concerns they had about embarking on growth; and support they felt would help them to grow in the future. 

5.1 Preparedness for future growth 

In the language of the COM-B model, preparedness for future growth was considered in terms of having the capability to grow and having the opportunity to do so. 

Capability

Broadly speaking, participants who felt they had the capability to grow were typically those representing larger businesses and young entrepreneurs. They mainly fell within the ‘Ambitious’ grouping of the growth typology (see Chapter 3). Conversely, those who felt they did not have the capability to grow tended to represent smaller businesses and/or to be older, and mainly fell into the ‘Ambivalent’ group. 

Capability was most commonly conceived of in terms of skills: those who felt able to grow often commented that they had the necessary knowledge and expertise to do so, either personally or within their business. Such knowledge and expertise was often described in fairly broad terms: participants talked about generally understanding their product, understanding their market, and being confident that they “knew what they had to do” to achieve their goals.  

In contrast, businesses that felt they lacked the capability to grow often identified specific skills gaps within their business that they felt required to addressed. These gaps commonly related to general IT skills, website and app development, financial management, and marketing. Notably, the businesses concerned tended not to have a plan in place to acquire these skills at any point in the near future. 

“Any future plans for the business would centre around getting an online presence. [But] building the website and social media, we don't have a lot of technical expertise in that area. So we could benefit from help with that.”

(Small enterprise, Wholesale, retail and repairs, West of Scotland, 6-10 yrs, F)

Beyond skills-related issues, the capability to grow was also discussed in financial terms. On the one hand, some participants commented on being fortunate enough to have sufficient finance in place to support their future growth, either in the form of income generated through the business or external investment. More commonly, however, businesses reporting lacking the resources to grow, including for staff recruitment. Financial constraints of this nature were particularly prevalent among small enterprises that had been operating for over ten years. 

“Going forward, if we want to develop something, we will have to throw a huge chunk of money at it to make it work, and that in itself is a deterrent.”

(Small enterprise, Sustainable tourism, North East Scotland, Over 10 yrs, M)

Time also emerged as a key capability factor influencing future growth potential. Even among those who felt they had adequate skills and/or resources to achieve growth, a lack of time was often cited as preventing them from delivering on their aspirations, particularly among sole traders and those in small businesses. This lack of time tended to be a symptom of balancing multiple demands, both inside and outside the business. Participants often commented that more hiring staff would help to address capacity issues, but the availability of suitable staff and the cost of employing them presented further hurdles, as noted above.

“We know what we have to do, but it is down to me not having enough time. We could grow more if I had time to be more proactive and find new business opportunities for the company – but I just don’t have that time.”

(Small enterprise, Energy, Glasgow, Over 10 yrs, F)

Opportunity 

The opportunity dimension of preparedness was primarily discussed in relation to market demand. Businesses that saw opportunities for growth often anticipated strong future demand for their products or services, based on either having had a strong performance in existing markets or from research into opportunities presented by new markets, including other countries. Businesses that were less confident in the level of market demand tended to see this as potentially restricting their future growth, notwithstanding their sometimes strong motivation and capability to grow. This sense of pessimism was similarly based on efforts to review current performance and research potential new markets.  

“It’s really down the market - as long as the market is busy you can continue to grow and find other things, but if the market stalls then growth will stall.” 

(Small enterprise, Manufacturing, Glasgow, Over 10 yrs, M)

“I've got the products and I've got the skill to grow if I wanted to grow.  But there just doesn’t seem to be the demand.”

(Sole trader, Manufacturing, Mid Scotland and Fife, Over 10 yrs, M)

Challenges related to market demand were particularly prevalent among businesses in more rural locations, who stressed that their potential to grow was undermined by such factors as local population decline, reliance on seasonal tourism-related income, as well low levels of investment in the local economy. These factors were seen to be very much outside the control of individual businesses, meaning that all they could do was concentrate on making sure they delivered their services to a high standard to maintain as much of their existing customer base as possible.  

“We’re in a rural remote location...we can’t do anything about the population size, we can’t do anything about the money that's available in the local economy… [all we can do is] make their visit to our store as pleasant as it possibly can be.”

(Small enterprise, Wholesale, retail and repairs, West of Scotland, 6-10 yrs, F)

5.2 Concerns about future growth

Beyond the issues cited above, participants raised a number of specific concerns about future growth – including some of those who were clearly motivated to grow their business and felt capable of doing so. Overwhelmingly, the main concern expressed was that of political and economic uncertainty, predominantly in relation to Brexit but also, to a lesser extent, the prospect of future Scottish independence. While a minority of participants felt that independence would be positive for Scottish businesses, constitutional uncertainty was generally seen as presenting possible risks to future growth, predominantly due to uncertainty over factors such as: the future cost of importing and exporting goods, the ease of trading in international markets, the free movement of workers, and general confidence in the economy as a whole. Participants from the farming sector spoke, in addition, about uncertainty over the future of subsidies post-Brexit. Overall, participants felt cautious about taking steps towards growth until they felt more certain about how the constitutional picture might play out.

“Politics, including the independence question, is creating uncertainty and this is not helping [businesses]. The vast majority of [businesses] are already doing as good a job as they could be, but we could be achieving even more if this air of uncertainty was removed. If there was more certainty, growth could be limitless.” 

(Small enterprise, Financial and business services, Highlands and Islands, Over 10 yrs, M)

“Brexit [is a concern]. No matter what happens it is going to be bad. I have got a real mix of people working here, of different nationalities, and without these people we can’t service the industry.” 

(Medium enterprise, Sustainable tourism, Mid Scotland and Fife, Over 10 yrs, M)

In terms of other concerns, there were businesses that were worried about potentially negative financial implications of growth. Specifically, they commented that increasing the size or scale of their business would inevitably increase costs, something that posed a risk if they were not able to generate sufficient income to cover these costs. Such concerns were sometimes grounded in past experiences of having struggled to cover costs, particularly during the recession, and were reflected in a very cautious, conservative approach to the setting of growth targets.

“Because our profitability is so low there is a high risk [that we] get little return on investment. So there is always the worry about whether we are going to get enough back, and will we be able to afford the ongoing investment.”

(Medium enterprise, Accommodation and food, West of Scotland, Over 10 yrs, F)

Participants also reiterated their concerns about the future impact of regulation on their business should they reach a certain size. Specifically, they referred to new obligations for employers in relation to pension provision and wage levels - though it was clear that many did not know what the specific implications of these changes would be for their business. 

As noted previously, some participants, mainly those who fell into the category of ‘Ambivalent’ in the growth typology, worried further that increasing the size of their business might result in their losing control over the decision-making process or the quality of the product or service. Consequently, their preference was for a gradual, steady level of future growth.

“We have got to make sure that we don't lose control…I think if we're trying to target ten per cent a year that's not exactly stratospheric, so if we stick to that sort of level, that's reasonably controlled and it shouldn't be a problem because we have the structure in place.”

(Medium enterprise, PST, Mid Scotland and Fife, Over 10 yrs, M)

“I wouldn't be looking to grow it massively, it would just be a little bit at a time and see how it goes… I'm not somebody that is going to jump in there and like, you know, not be sensible about it.”

(Small enterprise, Wholesales, retail and repairs, West of Scotland, Over 10 yrs, F)

5.3 Support needed for future growth

Finance – whether in terms of private investment, grants, or revenue generated by the business itself – emerged as one of the factors businesses felt would most help them to grow in the future. While some businesses had taken steps to actively seek out external financial support (by applying for grants, or approaching investors), this was not common. Indeed, some were pessimistic about their ability to source external financial support, either due to having been unsuccessful in the past, or because they were put off by what they perceived as lengthy application processes. Others felt restricted by what they saw as a lack of financial support avenues available to SMEs

“I find that self-employed people are like the dregs according to the government. Everybody else seems to get help here, there, everywhere. Self-employed people they just do not get anything, as far as I see…there is just no help out there.”

(Sole trader, Creative industries, North East Scotland, Over 10 yrs, M)

It was commonly felt that the government should provide more financial support for small businesses to help them grow; though, as described elsewhere in this report, participants generally demonstrated low awareness of existing such provision. 

Various other potential forms of support from government were suggested including: making procurement procedures less time-consuming and therefore easier for sole traders to manage; providing longer term subsidies for farming businesses (discussed in more detail in Chapter 4); offering VAT reductions for the hospitality industry to encourage consumer spending; and providing more rates relief for new businesses. These types of actions, it was suggested, would help make businesses more financially secure and therefore more confident in investing in future growth.

“Businesses need access to trouble free finance. The banks won’t do that anymore, so government should step in and help fill that gap.”

(Small enterprise, Real estate activities, Lothians, Over 10 yrs, M)

“I don’t think [government] takes hospitality seriously as an industry. Some party manifestos do not even mention it and considering it is Scotland’s biggest industry, that is a real shame. We are campaigning for VAT reductions on hospitality [which] encourage people to spend…I don’t understand why politicians don’t see the value in that.”

(Medium enterprise, Sustainable tourism, Mid Scotland and Fife, Over 10 yrs, M)

Support with marketing and promotional activity was also identified as a need. As noted earlier, businesses felt they would benefit from more information and advice on marketing activity, particularly social media marketing. They also felt that local agencies could do more generally to promote their local business communities. 

Increased networking opportunities were identified as another means of supporting future growth. Those who saw the value of networks had already taken steps to increase their contact with other businesses, though some noted that time remained a challenge in doing so. Echoing the positive views of organisations such as Entrepreneurial Spark outlined earlier, it was suggested that businesses would benefit from a structured approach to networking, for example, fora that brought together businesses from similar sectors to share resources and provide each other with advice, or else “portals” through which businesses could share information. 


Contact

Email: EIDEEBSPEnquiries@gov.scot